Associated British Foods plc (LSE:ABF) reported a 13% decline in adjusted operating profit to £1.51 billion for the 52 weeks ended 12 September 2026, as weaker profitability at Primark and difficult conditions in its food businesses affected annual performance.
Group revenue increased 1% to £19.58 billion from £19.46 billion a year earlier, although sales declined 1% on a constant currency basis. Adjusted operating profit fell 14% at constant exchange rates.
Adjusted profit before tax decreased 14% to £1.46 billion, while statutory pretax profit declined 10% to £1.28 billion.
The company maintained its annual dividend at 63.0p per share and confirmed that the planned separation of Primark from its food operations remains on schedule for December 2027.
Group Profitability Declines Despite Stable Revenue
Associated British Foods recorded statutory operating profit of £1.33 billion, down 11% from £1.48 billion in the previous financial year.
Adjusted earnings per share declined 11% to 156.0p from 174.9p, while basic earnings per share fell 7% to 131.9p.
The group’s results included £113 million of exceptional charges, comprising £91 million of primarily non-cash impairments and £22 million relating to restructuring activities.
Return on average capital employed decreased to 12.7% from 15.5%, reflecting the reduction in profitability.
Free cash flow remained broadly stable at £652 million, compared with £648 million in FY2025, supported partly by lower inventory levels at Primark.
Gross investment increased 15% to £1.43 billion as the company continued spending on manufacturing capacity, technology and other growth initiatives.
Primark Revenue Rises 2% but Operating Profit Falls 12%
Primark generated revenue of approximately £9.8 billion, representing growth of 2% at constant currency.
New company-operated and franchise store openings contributed approximately five percentage points to sales growth, offsetting weaker like-for-like trading in several markets.
In the UK, like-for-like sales increased 0.5%, with Primark reporting market share gains following improvements to its product offering and customer value proposition.
However, European like-for-like sales declined 4.7%, reflecting difficult trading conditions and the earlier stage of growth initiatives in those markets.
Primark’s adjusted operating profit decreased 12% to approximately £1.0 billion, with its operating margin reaching 10.2%.
The decline reflected increased investment in pricing, marketing and digital capabilities intended to strengthen customer engagement and support longer-term sales growth.
The retailer continued developing its franchise model and announced plans to introduce home delivery in Great Britain in the future.
Grocery and Ingredients Face Weaker US Demand
Associated British Foods’ Grocery division reported an 11% decline in adjusted operating profit.
The reduction was primarily attributable to lower earnings from its US oils operations, including the Stratas joint venture.
The Ingredients division recorded an 8% fall in adjusted operating profit, reflecting subdued demand for bakery ingredients in the United States.
Despite these pressures, the group continued investing in product development, marketing and manufacturing capabilities.
The company also progressed the integration of Hovis, with management targeting cost savings that can be reinvested in innovation and brand development.
New production capacity and other capital projects completed during the year are expected to support future growth across Grocery and Ingredients.
Sugar Division Records £47 Million Operating Loss
The Sugar business reported an adjusted operating loss of £47 million, primarily reflecting lower average selling prices in Europe.
Management said the European sugar market remained under pressure from excess supply and inventory levels carried over from previous periods.
The division is undergoing restructuring intended to align production more closely with demand and improve operational efficiency.
Conditions are expected to remain difficult in FY2027, with the company forecasting a further deterioration in the division’s financial performance.
Associated British Foods expects Sugar to record an adjusted operating loss of between £70 million and £170 million in the coming financial year.
The wide forecast range reflects uncertainty surrounding energy costs, production volumes in Africa and currency movements, particularly the Malawian kwacha.
Management indicated that recent improvements in global sugar prices could provide support in subsequent years, although the near-term European market is expected to remain challenging.
Meanwhile, the Agriculture division delivered adjusted operating profit of £19 million, broadly unchanged from FY2025.
Dividend Maintained and £253 Million Returned Through Buybacks
Associated British Foods proposed a final dividend of 42.3p per share, bringing the total annual distribution to 63.0p.
The dividend was unchanged from the previous financial year and includes an interim payment of 20.7p per share.
The group also completed £253 million of share repurchases during FY2026.
Net cash before lease liabilities stood at £305 million at the year-end, compared with £390 million a year earlier.
Total net debt increased to £2.85 billion from £2.63 billion, while the company’s leverage ratio was 1.1 times.
Management described the balance sheet as providing capacity to support continued investment and shareholder distributions.
Primark Demerger Remains Scheduled for December 2027
Associated British Foods confirmed that preparations for the separation of Primark from its food operations are progressing according to plan.
The decision to demerge the businesses followed a review of the group’s structure completed in April 2026.
The transaction is expected to be finalised in December 2027, creating two separately focused businesses.
Following the separation, the food operations will operate under the AB Foods name, encompassing Grocery, Ingredients and Sugar & Agribusiness.
The company plans to hold separate Capital Markets Days for Primark and AB Foods ahead of the demerger.
A series of investor education events covering the food businesses is also scheduled between April and July 2027.
Chief Executive Officer George Weston said the company had made operational and strategic progress despite difficult market conditions.
“Our results this year reflect a challenging operating environment and macroeconomic headwinds,” Weston said.
He added that the group would continue focusing on financial performance while investing in opportunities intended to support longer-term growth.
FY2027 Profit Expected to Decline Further
Associated British Foods expects adjusted operating profit and adjusted earnings per share to be below FY2026 levels in the financial year ending in 2027.
The anticipated decline is primarily attributable to the Sugar division, where losses are expected to increase.
In Primark, the company expects store expansion across Europe, the United States and franchise markets to contribute approximately 4% to sales growth.
Primark’s adjusted operating margin is forecast at around 10%, reflecting continued investment in marketing, pricing and digital initiatives. This excludes expected separation-related dis-synergy costs.
The company continues to target annual sales growth contributions of approximately 4% to 5% from store expansion over the foreseeable future.
Within Grocery, adjusted operating profit is expected to remain broadly in line with FY2026, as sales growth across several businesses is offset by higher input costs and the initial consolidation of Hovis losses.
Ingredients profitability is also expected to remain broadly stable, with growth in speciality ingredients balanced by start-up costs associated with a new yeast production facility in India.
Agriculture adjusted operating profit is expected to increase.
Outlook
Associated British Foods enters FY2027 facing continued pressure from European sugar markets, cautious consumer spending and elevated energy and input costs.
Management expects adjusted operating profit and earnings per share to decline further, although ongoing investment in Primark, Grocery and Ingredients is intended to support medium-term growth.
The integration of Hovis, restructuring of UK Sugar operations and commissioning of the new Indian yeast facility remain important operational priorities.
The planned December 2027 demerger of Primark represents a major structural change for the group, with preparations continuing alongside its existing business operations.
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